Abstract:
This research aims to empirically prove the influence of debt to total assets ratio,
capital adequacy ratio, total assets turnover, return on assets, and good corporate
governance towards financial distress by Altman Z-Score. The five independent
variables within this research being examine by several analysis methods of
descriptive analysis, classical assumption, multiple regression analysis, and
hypothesis testing. This study uses the population of Islamic banks published in
the Financial Service Authority during the period 2013-2018, where the data is
collected from official bank websites. Adopting a quantitative research and has 72
observations from twelve banks in six years. The result shows that capital
adequacy ratio and return on assets have significant positive influence towards
financial distress. While debt to total assets ratio has the significant negative
influence to financial distress. However, total assets turnover and good corporate
governance have a negative insignificant influence to Financial Distress.
Simultaneously, all independent variables have a significant influence on financial
distress, which is indicated by a value of 59.9% and the remaining 40.1% is
explained by other variables excluded this study. Moreover, debt to total assets
was chosen as the most significant factor affecting financial distress.
